Pawns and Queens Revisited: Public Provision of Private Goods When Individuals Make Mistakes Abstract: This paper analyses the optimal tax policy and public provision of private goods when individuals differ in two respects: income-earning ability and rationality. Publicly provided goods should be overprovided or subsidised, relative to the decentralised optimum, if society’s marginal valuation of them exceeds the individual valuation and if these goods help relax the self-selection constraints, formulated in a new way. Optimal marginal income tax rates are shown to di¤er from the standard rules if publicly provided goods and labour supply are related

Jukka Pirttilä and Sanna Tenhunen

No 212, Working Papers from Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE

Keywords: Behavioral economics; optimal taxation; public provision (search for similar items in EconPapers)
Pages: 36 pages
Date: 2005-04-01
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Citations: View citations in EconPapers (1)

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